TaxTMI 
TaxTMI 
2024 (11) TMI 1554
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....rred in confirming the action of ld. AO in reopening the assessment u/s 148 in the case of assessee solely on the basis of so-called information received from the Investigation Wing and without independent application of mind and without providing adequate opportunity. Thus, the action of the Ld. CIT (A) in confirming the reopening of the assessment u/s 148 and upholding the consequent reassessment order so passed deserves to be held bad in law. 1.2. That, the Ld. CIT (A) has further erred in confirming the action of ld. AO in reopening the assessment, beyond the 3 years despite of the fact that there was no income escaping assessment representing "ASSET" exceeding Rs. 50,00,000/- in accordance with explanation to Section 149 of the Act. Thus, the reassessment proceedings initiated is time barred and entire proceedings are void ab initio. 1.3. Without prejudice to above, the Ld. CIT (A) has further erred in confirming the action of ld. AO in reopening the assessment already completed u/s 143(3) r.w.s. 153A whereas, in the reasons recorded for reopening, there is no allegation whatsoever against assessee, of not truly and fully disclosing the material necessar....
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....se of search conducted in some other case namely Veto Group. Appellant prays that assessee is not associated with Veto Group in any manner, neither ld. CIT (A) nor ld. AO have established that "M B Agrawal" denotes "Mukut Behari Agrawal, more particularly, when such ledger does not contain PAN, signature or any such details which proves that entries recorded in such ledger pertain to the assessee, thus addition so made is unjustified. 3.2. That, ld. CTT(A) has further erred in confirming addition of Rs. 74,51,800/- made by ld. AO without even providing copies of statements of one Sh. Nandan Lal Alwani, relied upon for making such addition and further in denying opportunity of cross examination, which is against the principle of natural justice and addition so made deserves to be deleted. 3.3. That, ld. CIT (A) has erred in confirming addition of Rs. 74,51,800/- made by ld. AO simply u/s 69A of the Act, whereas section 69A is not applicable on the alleged facts stated by the ld. AO. 2.1 As we note that the Ground No. 1 to 1.3 raised by the assessee deals that the ld. CIT (A) has erred in confirming the action of the AO in reopening the assessment ....
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....ore the ld. CIT (A) who has confirmed the action of the AO as to initiation of proceedings by mentioning in his order that ''Ground of appeal is not allowed. The relevant observation as made by the ld.CIT(A) at para 7.4 of his order is reproduced as under:- "7.4 For the aforementioned reasons, it is held that there was no infirmity in the initiation of proceedings u/s 147 and issue of notice of the Act by the Assessing Officer and there was sufficient material on record for him to form a prima facie belief that income had escaped assessment. Accordingly, the Ground of appeal is not allowed.'' 2.4 Now against the order of the ld. CIT(A), the assessee has filed the present appeal before us challenging the action of the AO as to initiation of proceedings u/s 147 of the Act and prayed to quash the order u/s 147 of the Act with following submissions : 1. Time limit for issuance of notice u/s 148A for the year under consideration has already been expired on 31.3.2022 2. Reopening solely on the basis of information from Investigation Wing; 3. Reopening by jurisdictional Assessing officer and by Faceless Assessing Officer, which is contrary to the spe....
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....om 225 (Bom.) (APB 151-208), after threadbare analysis of section 149 has held that: Section 149, read with section 148A, of the Income-tax Act, 1961 - Income escaping assessment -Time limit for issuance of notice(Illustration)- Assessment years 2013-14 to 2015-16 - Assessee, engaged in information technology consulting, software development and business process services, filed its return of income - Same was accepted and assessment was completed under section 143(3) - Assessing Officer issued a reopening notice dated 25-5-2022 on several grounds - Whether time limit to issue notice under section 148 had already expired on 1-4-2021 for assessment years 2013-2014 and 2014-2015, when section 149 was amended, therefore, reopening for assessment years 20132014 and 2014-2015 had already been barred by limitation on 1st April, 2021 - Held, yes - Whether, accordingly, extended period of ten years as provided in section 149(1)(b) would not have been applicable to assessment years 20132014 and 2014-2015, de hors proviso - Held, yes -Whether, further, for assessment year 2015-2016, erstwhile time limit of six years expired on 313-2022, and therefore, impugned notice under section 14....
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.... 31-03-2022 47 31-03-2022 DIN on Notice u/s 148 No 56-57 No Notice u/s 148 issued by Ld. JAO 63 (last line) Ld. AO Relevant observations of the Hon'ble Supreme Court in the case of Union of India Vs. Ashish Agarwal & Others dated 04.05.2022 in Civil Appeal No. 3005/2022. Observations in para 8 page 28 of the order (i) The respective impugned section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and treated to be showcase notices in terms of section 1484(b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees con reply to the notices within two weeks thereafter. (ii) The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(b) be diapered with as a onetime measure vis-à-vis those notices which have been issued under Section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Co....
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....d into by the assessee are in relation to BSE 500 companies and no evidence has been brought on record to establish that if any action was taken against any of such companies by SEBI or under Income Tax Act. It is noted that assessee traded through online portal of Stock Exchange, where assessee is not aware of counter party and prices are also determined by market forces and one can only predict the future variation and take advantage of the same. In fact, SEBI order is also passed on presumption basis and does not even precisely quantify the advantage alleged to have been taken by assessee as a result of trade reversal as alleged. In this scenario, it appears that action of AO in reopening of assessment is solely on the basis of SEBI order and without independently verifying the matter contained therein which is against the specific provisions of section 147 of the Income Tax Act and it requires AO to record satisfaction independently. Hence, in view of above, it is evident that the only basis of reopening of assessment and for making huge addition of Rs. 5,12,17,312/- merely on SEBI order, statements of brokers (not related with assessee) and information received from I & C....
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....income. If this is the fact, there is certainly a factual inconsistency in reopening the assessment that the assessee has not filed any return of income. Secondly, in the reasons stated the AO believed that the income escaped assessment only based on the report of the DDIT(Inv.) that the income had escaped more than 15 crores. However, we observe that what is the basis for 15 crores is not specified in the reasons. This is only a bald statement that the income of the assessee has escaped assessment for more than 15 crores without spelling out any details which is said to have been given in the DDIT report. Therefore, the reasons recorded in the present case at best can be treated to be a reason to suspect which is not sufficient for reopening the assessment u/s 148 of the Act. The requirement of application of mind is missing the present case, there is no independent application of mind by the AO to tangible materials and reasons and the AO failed to demonstrate live link between tangible material and formation of reason to believe that income had escaped assessment. 15. In view of the above, we hold that the reassessment made in the section 143(3) read with section 147 of....
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....der the provisions of the s. 147 of the Act could not be sustained and the same deserves to be set aside. 2.7 It is further noted that assessment in the present case has been reopened as well as completed without following provisions of section 151A, which provides procedure for "Faceless assessment of income escaping assessment" while issuing the notice u/s 148 of the Act. Our attention was invited by the ld.AR to notification no.18/2022 dated 29.03.2022 issued by CBDT in terms of section 151A, para 3 of which provides that notices for assessment/re assessment/re-computation under Faceless Assessment Scheme shall be issued through "Automated Allocation, in accordance with risk management strategy formulated by the Board as referred to in section 148 of the Act for issuance of notice, and in a faceless manner, to the extent provided in section 144B of the Act with reference to making assessment or reassessment of total income or loss of assessee.", i.e. by FAO, whereas, in the case of assessee company notice u/s 148 as well as u/s 148A have been issued by ACIT Circle 1 Jaipur, i.e. Jurisdictional Assessing Officer (JAO). It is further noted that Hon'ble Bombay High Court in the ....
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....ent applies from stage of show cause notice under section 148, and its object would be defeated if such notices are issued by Jurisdictional Assessing Officer. 4. Mettler Toledo India (P.) Ltd. v. Assistant Commissioner of Income-tax [2024] 165 taxmann.com 541 (Bombay) Held: Where reassessment notice was issued by jurisdictional Assessing Officer and not by faceless Assessing Officer, as was required by provisions of section 151A read with Notification No. 29/2022, dated 29-3-2022, since JAO had no jurisdiction to issue impugned notice, proceedings initiated under section 148 would were to be quashed 5. Navita S. Hetampuria v. Income-tax Officer [2024] 165 taxmann.com 424 (Bombay) Held: Where reassessment proceedings were initiated by jurisdictional Assessing Officer and not by Faceless Assessing Officer as required under section 151A, such proceedings were to be quashed. 6. Paras Mahendra Shah v. Union of India [2024] 165 taxmann.com 546 (Bombay) Held: For a notice to be validly issued for reassessment under section 148, jurisdictional Assessing Officer has no jurisdiction to issue impugned notice, same is to be issued by ....
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....ry to provisions of section 151A and schemes framed thereunder, whereby Income Tax Authority was required to undertake these proceedings in a 'faceless' manner, and accordingly, department was to be directed to withdraw impugned notice and issue fresh notices if permissible under law as per scheme read with section 151A. Hence, in view of abovementioned judgments, it is felt that in the present case, notice u/s 148 was issued by JAO, i.e. ACIT Circle 1 Jaipur and not through automated allocation as provided in Notification No. 18/2022, dated 29-3-2022 r.w.s. 151A, which is not in accordance with provisions of section 151A of the Act and the same deserves to be quashed and set aside. Thus in view of above, it is noted that initiation of reassessment proceedings is not in accordance with law as notices u/s 148A and 148 as well as order u/s 148A(d) have been passed by JAO instead of FAO, which is not in accordance with specific provisions of statue. Thus order passed u/s 147 is bad in law and deserves to be quashed. It may be noted that the notice u/s 148 dated 30.07.2022 is invalid and bad in law as the same has been issued without a DIN. Hon'ble Bombay High Court in the case....
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....ed that that initial notice u/s 148 in this case was issued on 13.5.2021, whereas search in the case of Veto Group was conducted on 22.12.2021. It thus implies that at the time of issuing notice dated 13.05.2021, this reason of reopening did not exist and there was no reason to believe, on which assessment could be reopened. Subsequent notices issued u/s 148A in accordance with Apex Court decision in the case of Ashish Agrawal were merely to provide a leeway to the department to complete the proceedings in accordance with new provisions and would have no impact whatsoever on the basic requirement that reasons had to be recorded prior to initiation of proceedings. As in present case, there was no reason recorded at the time of issuing original notice, the same could not be incorporated while issuing notice u/s 148A (b). In other words, information conveyed to assessee vide notice u/s 148A(b) dated 1/6/2022 was not available with AO himself at the time of issuing initial notice for reopening and was incorporated at a much later stage. It is therefore noted that reopening of assessment on the issue of entry of Rs. 74,51,800/- by alleging it as unaccounted transaction is not in ac....
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....ogus profit through reversal trading. Therefore, the same is hereby added as unexplained investment which assessee has introduced in business in the form of bogus profit earned through reversal trade....'' 3.3 In first appeal, the ld. CIT (A) has not allowed the above ground of the assessee holding that the appellant has not discharged its onus either u/s 68 or u/s 69A of the Act and hence the additions made by the AO were confirmed by him. 3.4 During the course of hearing, the ld. AR of the assessee filed the written submission praying that that huge addition of Rs. 5,12,17,312/- has been made by AO merely on conjectures and surmises and without rebutting the most specific and detailed submission made by assessee that addition u/s 69A cannot not be made since the entries pertaining to Rs. 5,12,17,312/- are appearing in the regular books of accounts which are duly audited and hence not covered within the provisions of section 69A of the Act and deserves to be deleted. 3.5 On the other hand, the ld.DR supported the orders of the lower authorities and submitted that no written submissions had been filed by the assessee and no evidence had been provided to support t....
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....xt para has made addition u/s 69A by concluding as under: "5. In view of the foregoing facts, it is sufficiently clear that the assessee has benefitted from engaging in reversal trades in illiquid stock options on the BSE resulting in non-genuine profit amounting to Rs 5,12,17,312/- which has been set off against other incomes .The assessee has introduced his unaccounted income by booking bogus profit through reversal trading .Therefore, the same is hereby added as Unexplained investment which assess has introduced in business in the form of bogus profit earned through reversal trade. Penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 have been also initiated for furnishing inaccurate particulars of his income." From perusal of above, it is evident that in entire proceedings, stand of AO has been changing consistently as to nature of alleged accommodation entry and section under which the same needs to be added. This itself shows that the huge addition of Rs. 5,12,17,312/- has been made by AO solely relying upon the information received and without examining the issue independently after due application of mind. It is further submitted that statements of some ....
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....ssee firm. The detailed note on this procedure is as under:- 1. That the assessee had a trading account opened with recognized and government approved brokers who are members of various stock exchanges and are closely regulated by SEBI / directly which in present case for filtered transactions is Bombay Stock Exchange (BSE) where, account is opened after due compliance of KYC norms. 2. That assessee has traded in future and option (F&O) Segment through aforesaid broker via online system and contract note is issued by broker for all transactions so executed which is generated with precise details of time at which transaction is executed. 3. That transactions so executed are at a price which is being reflected on BSE exchange online and is uncontrolled by assessee, as such exchanges are being operated by the government approved bodies and are on digital mode. 4. That, all the transactions entered into by assessee are subject to payment of Securities Transaction Tax. 5. That broker alongwith assessee has complied with all the necessary compliances as required under SEBI law for allowing a person to transact in stock exchange. 6. Th....
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....which could prove that assessee knew the counter party and was hand in glove with such party for carrying out such transactions to incur loss. Thus, basically, AO made huge addition of Rs. 5,12,17,312/-, solely on the basis of information received from I & CI Wing, emanated from the order passed by SEBI in the case of assessee wherein allegation was made on presumption basis. In this regard, it was submitted by the assessee (PB Page 88) before AO that SEBI, itself in its order dated 31.1.2020 has stated that "it is not possible from the material available on record to quantify the amount of disproportionate gain or unfair advantage resulting from the artificial trades between the counterparties or the consequent loss caused to investors as a result of the default.'', However submission of the assessee was brushed aside. At this juncture, it is also relevant to state that the transactions under reference were carried out on BSE where selected scripts are being permitted for being traded on F&O Segment falling under the category of BSE-500 and lot size also is decided by the BSE. If any suspected transaction is noticed by the administration of BSE / SEBI it immediately suspends ....
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....to second allegation of buying and selling with the same counter party, it is submitted that in case of online trading in listed securities, there cannot be buying and selling with the same counter party for the sole reason that all the trades are executed through the online portal and even while sitting in a same room and trying to sell from one desktop and trying to purchase from the other is not possible as the stock exchange is running on the technology of micro nano seconds wherein predetermining the buyer and seller for a trade is humanly not possible and if it is so, the department has to prove beyond doubt that the trade executed by the assessee is only with one single party, hence, the second allegation also does not hold good. 3. The third allegation of reversing the trade within minutes, it is submitted that the total volume of the transactions executed by the assessee is in crores wherein numerous transactions are executed through online portal and the perception of holding the trades for days require margin money as per exchange rules wherein huge amount of funds is required of which the opportunity cost of interest is being levied with every passing day and t....
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....at one of the counterparty books a profit while the other counterparty books a loss. Hence, it would be appropriate to consider the impact of these transactions between the two counterparties in totality. When the impact of artificial volumes created by the two counterparties is seen as a whole, it is not possible from the material available on record to quantify the amount of disproportionate gain or unfair advantage resulting from the artificial trades between the counterparties or the consequent loss caused to investors as a result of the default." From the perusal of above para, it is clear that SEBI itself is not in possession of the desired information to quantify the amount of advantage made by assessee, then how can genuine business profits of assessee be treated as fictitious in absence of such material. Hence, in the circumstances, allegations of AO are baseless in the scenario that no evidence of shifting the profit of the assessee firm to any other entity has been brought on record. Further, it is observed that trading in BSE or NSE is completely without intervention of human interface except for punching the trade and in such circumstances it cannot be said that tra....
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....the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above." 2. Hon'ble Apex Court in the case of CIT vs Odeon Builders Pvt. Ltd. in Civil Appeal No. 9604-9605 of 2018 has held as under: S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination. 3. Hon'ble Jaipur bench of ITAT in the case of Maverick Commodity Broke....
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....ance of probability is applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favorable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumptions of facts that might go against the assessee. Once nothing has been proved against the assessee with aid of any direct material especially when various rounds of investigations have been carried out then nothing can be implicated against assessee." 5. Hon'ble Gujrat High Court in the case of Sanjiv Dhireshbhai Shah v. Income-tax Officer [2024] 165 taxmann.com 179 (Gujarat) has held that where Assessing Officer issued on assessee a notice under section 148 seeking to reopen assessment for reasons that assessee had indulged in generating non genuine losses and profits by trading in illiquid stock options on Bombay Stock Exchange, since there was no allegation that assessee had earned any income which was not offered to tax, reasons recorded could not be used to form any reason to believe as to escapement of income for assuming jurisdiction to reopen assessment. Therefore, as the assessee having discl....
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....e for adding back amount in question as 'unexplained cash credits' u/s 68, it could not pass final order by adding said amount as 'unexplained money' u/s 69a without giving assessee an opportunity to explain." At this juncture provisions of section 69A of the Act is reproduced as under for ready reference- Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. On perusal of aforesaid provision it is clearly evident that the addition under section 69A could be made if the assessee is found to be the owner of money that is not recorded in th....
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....facts pertaining to the grounds of appeal are that during the course of search action conducted in the case of Veto Group on 22.12.2021, a pen drive was found and seized from accountant of the group, Sh, Nand Lal Alwani, wherein a tally file namely "VIKAS" was found (PB Page 126). It has been alleged that a ledger in the name of "MB Agrawal" as found in such tally data pertained to the assessee. Since the accountant of Veto group in his statements had admitted that tally data contained unaccounted transactions of Veto group, therefore, it was alleged that transactions in ledger of "MB Agrawal" were unaccounted transactions of the assessee. Assessee raised objections against this, in reply filed in response to notice u/s 148A as well as in response to show cause notice, however the same was brushed aside and addition was made of entire sum of Rs. 74,51,800/- as appearing in ledger so found by alleging the same as Unexplained Money u/s 69A. 4.3 In first appeal the ld. CIT (A) has confirmed the action of the AO by holding that the assessee has not discharged its onus and the ground of appeal is not allowed. 4.4 During the course of hearing, the ld. AR of the assessee submit....
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....e other person liable for the transactions and also the consequential effect cannot be given against the other person and simultaneously it cannot bind / make liable to the other person from the entry / transaction (s). Further the Bench takes into consideration the decision of ITAT Delhi Bench in the case of DCIT vs Mahabir Prasad Gupta (ITA No. 713 & 714/DEL/2011 dated 23.11.2012) has held as under: 7. We have heard the rival contentions and gone through the record carefully. We find that similar issue was considered by the ITAT in a number of cases. The findings recoded in the case of Atul Gupta read as under: "16. We have duly considered the rival contentions and gone through the record carefully. The issue for our adjudication is whether the narration found in the diary of Shri Brij Mohan Gupta recovered during the course of search carried out at his premises in 2004 is a conclusive evidence against the assessee to hold that assessee made investment in advancing the loan to certain parties through Shri Brij Mohan Gupta. The revenue in order to prove its case is harping upon the narrations available in the diary, statement of Shri Ram Avtar Singla and Shr....
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....a before us. Therefore, in our opinion, the issue in dispute is squarely covered in favour of the assessee by the orders of the ITAT passed in the case of other persons i.e. Ashok Prasad Gupta, Atul Gupta, Dev Dutt Prasad etc. 9. On due consideration of all these material, we do not find any merit in this appeal. It is dismissed." It may be noted that above decision of Hon'ble ITAT has been affirmed by Hon'ble Delhi High Court in its decision dated 20.10.2015 in ITA No. 814 of 2015. Subsequently, following the above decision of Hon'ble High Court, issue was decided in favour of assessee in CIT vs Sant Lal Delhi HC (2020) 195 DTR (Del) 203, (headnote reproduced) "Income from undisclosed sources-Addition under s. 69A-Material discovered during search of third person-Tribunal found that the Revenue has placed on record statement of BM and AS but still Revenue has failed to establish link between the information noted in abbreviated form and the assessee- Revenue has not been able to produce any cogent material which could fasten the liability on the assessee-CIT(A) has also examined the assessment record and has observed that the AO did not make any further i....
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....t justified 3. ACIT v. Prabhat Oil Mills [52 TTJ 533 (Ahd)] - In this case, the department relied upon certain notings in the seized diary found from the premises of third party and contended that the assessee had made sales outside the books of accounts. However, the assessee denied of having made any sales outside the books of accounts. The Hon'ble Tribunal held that once the assessee denies the transaction, the onus was on the Assessing Officer to prove with corroborative evidence that the entries in the seized diary represented sales outside books of accounts. The Hon'ble Tribunal further held that mere entries in the accounts of third party was not sufficient to prove that assessee had indulged in transaction outside books of accounts. Further, in para 9 of the order, the Hon'ble Tribunal also rejected the argument of the department that the matter should be set aside to the file of the Assessing Officer. 4. CIT v. M/s Daga Fibres Pvt. Ltd (Bombay High Court)- The Hon'ble Bombay High Court upheld the order of the Hon'ble Tribunal wherein the addition made by the Assessing Officer on the basis of loose paper found from the....